Income Tax Appellate Tribunal - Ahmedabad
The Gujarat Institute Of Housing And ... vs Assessee on 29 September, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL "C " BENCH, AHMEDABAD.
BEFORE SHRI PRAMOD KUMAR ACCOUNTANT MEMBER AND SHRI S.S. GODARA JUDICIAL MEMBER I.T.A. Nos. 1051 to 1056/Ahd/2015 (Assessment Years 2006-07 to 2011-12- respectively) M/S M/S. THE GUJARAT INSTITUTE Deputy Director of Income OF HOUSING & ESTATE Tax, (Exemption), DEVELOPERS, 2nd Floor, GIHED BHAVAN SITE OFFICE, Nature View Building, GIHED LANE, Off Ashram Road, NEAR MAPLE COUNTY, AHMEDABAD.
B/H. ORNET PARK, PAKWAN SINDHU BHAVAN ROAD, SHILAJ, AHMEDABAD.
PAN AAATT 4761 F
(Appellant) v/s. (Respondent)
By Appellant Shri S.N. Soparkar,Sr. Adv.
By Respondent Shri Dileepkumar,Sr.D.R.
सुनवाई क तार ख/Date of Hearing : 10 -09-2015
घोषणा क तार ख /Date of Pron ouncement:29-09-2015 आदेश /O R D E R PER S.S. GODARA JUDICIAL MEMBER:
This batch of six assessee's appeals arises from six separate orders passed by the CIT(A)-9,Ahmedabad dated 2-2- 2015 in case Nos.CIT(A)-9/ 313, 318, 320, 314, 287 and 321/DDIT Exem/2014-15, for A.Yr.2006-07,2007-08,2008-09, 2009-10, 2010-11 and 2011-12 all dated 2-2-2015 in ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
proceedings u/s.143(3)/143(3) r.w.s. 147 of the Income tax Act,1961 for short 'the act' in former three assessment years and u/s.143(3) in the latter three years.
2. Both parties inform at the outset that the assessee's appeal in A.Y.2006-07 and 2007-08 raise two substantive grounds challenging lower appellate order on validity of reopening and its assessment as an AOP.,thereby denying mutuality benefits. The latter four assessment years from 2008-09 to 2011-12 are stated to be raising mutuality ground only. The assessee does not press for its legal ground. This leaves with us with the sole question identical in all cases as to whether the assessee is entitled for mutuality benefit or not in view of the facts and circumstances narrated in succeeding paragraphs. It is to be seen that the Assessing Officer first framed a regular assessment in A.Y. 2010-11.Thereafter he initiated reopening against the assessee in A.Ys.2006-07 to 2008-09. We would accordingly refer to the facts and conclusions drawn in A.Ys. 2006-07 and 2010-11; wherever necessary.
3. This assessee GIHED is a section 25 company registered since 1-9-2007. It was a non trading corporation under the Bombay Non Trading Corporation Act, 1959 before that. Its objects read as under:-
2ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
"3. The objects for which the Institution is established are as under:-
(a) To collaborate with the Departments of Governments, Local Authorities and such other Institutions in the matters concerning and related to the profession of Engineers, housing and estate developers, contractors, etc. with a view to take active interest in the welfare of the community.
(b) To manage, Develop, organize, execute, maintain and carry on all such activities either for research or development in solving housing problems in the state of Gujarat.
(c) To remove the difficulties in the construction of housing.
(d) To look after the progress of all the members in the profession of construction.
(e) To foster goodwill amongst the members by arranging meetings and discussions periodically etc. of common interest.
(f) To protect the interest and rights of members and for the purpose of the said association to make correspondence, presenting applications to such officers or offices as may be necessary and make representations.
(g) To bring the members in contact with each other in order to solve the problem of any members.
(h) To study the orders, resolutions, Rules, Regulations and Policy etc. framed by the Government, Local Bodies, Local Authority, regarding the needful acts in the interest of members.3
ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
(i) To comprise or to solve any problem by interfering in case of any dispute between/or amongst the members or with others on the re quest of the members of the association.
(j) To collect and accept contributions from members as and when required and determined by the association and to make and create therefrom a fund for office maintenance, salary to employees, provide essential service to the members, and raise a sinking fund for emergency and/or contingency expense.
(k) To carry on activity for the purpose of the education, medical relief to poor and needy, to help in natural calamities and for such other objects for attaining uplift of general public and for those purpose to start and maintain recreation, cultural, educational and medical centers.
(l) To do all such other lawful things as are incidental or conclusive to the above subjects.
Provided that the institution shall not support with its fund or endeavor to impose on or procure to be observed by its members or otherwise any regulations or restrictions which if an object of the institution would make it a trade union."
4. It is evident that clause 5 of the assessee's articles provides that its income and property whenever derived shall be applied solely for promotion of its objects in the memorandum. And that no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise to persons having acquired its membership at any time. There is a further stipulation that any surplus arising 4 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
from its dissolution would go to similarly placed institution and not its members.
5. We come to assessment year 2006-07 to 2011-12. The assessee carried out GIHED Fiestas, property shows and cricket tourneys. Its members and non members made contributions to the tune of Rs.37,08,050 and Rs.16,27,100/-; respectively in A.Y. 2006-07. The latter category of non members' income reads a figure of Rs.3,65,777/-. The assessee did not file return at the first instance in A.Ys. 2006- 07 to 2008-09. The Assessing Officer took clue from his findings in a scrutiny assessment framed on 28-3-2013 pertaining to assessment year 2010-11 holding it as an institution without section 12AA registration and also declining it mutuality exemption and issued section 148 notice on the same premise in these first three assessment years. The assessee claimed itself to be a charitable institution with an alternative plea of mutuality exemption since providing services to its members only. The Assessing Officer noticed its non registration under section 12A to deny the former plea. He opined qua the alternative mutuality plea that it conducted property shows and cricket tournaments resulting in excess over expenditure of Rs.1,21,54,592/- to be added back as its trading income in the hands of an AOP. He did not entertain the mutuality plea by calling it as an after thoughtone. We find similar reasoning in A.Y. 2006-07 wherein the assessee filed its 5 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
return in furtherance to section 148 notice dt.28-3-2013 stating income of Rs.7,47,319/- comprising interest income of Rs.3,77,280/-, miscellaneous income of Rs.2,750/-, kasar of Rs.504/- and the one from non members of Rs.3,65,777/- (supra). The Assessing Officer observed in scrutiny that the assessee had sought to avail mutuality exemption as a default measure without section 12A registration. He heavily relied upon findings recorded in A.Y. 2010-11 hereinabove and adopted the same course of action in A.Y.2006-07 and all other assessment years in question.
6. The assessee preferred separate appeals. The CIT (A) upholds the Assessing Officer's action in all assessment years. The relevant findings under challenge in A.Y. 2006-07 read as follows:-
"After considering the submissions and case laws relied upon by the appellant, I am of the opinion that appellant's case is not covered by principle of Mutuality and its income be computed accordingly. The appellant's case is also shows the changing stand of appellant at every stage of assessment and during appellate proceedings one factors which is very important in the case is that there has been total suo moto non disclosure of facts with reference to taxability status of appellant till the time the case came up in scrutiny in AY 2010-. Then only when the appellant realized that it does not have registration u/s 12 AA, under which it has claimed exemption then suddenly it changed its stand and claimed that it had been already claiming exemption on the 6 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
doctrine of mutuality in earlier years also. Here the vital question is also the allowability of principle of mutuality either by way of claiming it afresh or by way of following principle of consistency. The appellants activities have been discussed in detail by Id AO also and has rightly mentioned in the "remand report the" the object of appellant does not reflect any reference or mention regarding principle of mutuality.
a) There is no valid reason given by the assesses for claim of exemption u/s. 11 of the I.T. Act, 1961 after its conversion into section 25 of the companies act.
b) The assessee says that it is out of possible miscommunication and lack of understanding between chartered accountant and assessee that wrong claim u/s.11 of the I.T. Act was made. There is no possibility of miscommunication on the fact that 12A registration is must for claim of exemption u/s.11 of the I.T. Act. The assessee has also not applied for registration with DIT (E).
c) The case of the assessee was never selected for scrutiny before A.Y. 2010-11. During scrutiny assessment, the claim of the assessee u/s. 11 of the I.T. Act, 1961 was found to be wrong. There was no scrutiny assessment before this period and hence comments could not be offered on claim of the assessee before that period.
d) Only when the assessee came to know that its income is not exempt u/s.11 of the act, it tried to take the benefit on principle of mutuality. It is definitely an afterthought.
e) The object of the company trust is also seen and it is gathered that no reference or mention is provided regarding principle of Mutuality.7
ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
f) The income of the trust is mainly derived from property shown in India and abroad. From such property show, large income is generated from members as well as from non members in spite of the fact that trust work on no profit motive.
g) Further, it is seen that Income is earned out of cricket tournament organized by them. The cricket is very popular game and has huge marketing potential. Hence, the income is earned out of activities which have huge market demand. Such activities are in the nature of business and trade and is hit by provision contained u/s. 2(15) of the I.T. Act, 1961.
The claim of appellant of principle of mutuality, after realizing that it isn't covered u/s.12AA is an afterthought. To understand the applicability of principle of mutuality it is also important to understand basics of principle of mutuality.
The basic principle of mutuality applies to all non- commercial activities. As regards income from commercial pursuits, if a club or society or any other entity sets about on an adventure of a commercial nature, it would lose its identity as a mutual concern and it cannot lay any claim for exemption. The mutual concerns like social clubs and co-operative societies have various sources of income, some of which are governed by the principle of mutuality and hence are not liable to income-tax, whereas others are not so governed and therefore, they are liable to income-tax. The 'Principle of Mutuality' which was borrowed from the "English Decisions' has further been refined over the years with the various decisions pronounced by Supreme Court and High Courts. Still the application of this principle in a fact-situation should be very cautious and as per the ratios emanating from the various decision. So far as the recognition of the 'Principle of Mutuality' under the Income Tax Act, 1961 is 8 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
concerned, the "Act" has following indirect references to this principle:
a) Section 2(24)(vii) states:
"income" includes "the profits and gains of any business of insurance carried on by a mutual insurance company"
b) Section 28(iii) states:
The following income shall be chargeable to income- tax under the head Profits and gains of business or profession':
"Income derived by a trade, professional or similar association from specific services performed for its members"
c) Circular No. 11/1008, dated 19-12-2601 State:
'The cardinal requirement is that all the contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund: in other words, there must be complete identity between the contributors and the participators' observed Lord Macmillan in the case of Municipal Mutual Insurance Ltd. v. Hills [1932] 16 TC 430 at p. 448 (HL).
Certain instances of non-mutual concerns decided by various courts which clearly lays down the principle of mutuality and motive of profit earning are discussed hereunder :-
CIT v. Kumbakonam Mutual Benefit Fund Ltd. [1964] 53 ITR 241 (SC) 9 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively.
The Gujarat Institute of Housing & Estate Developers.
A company limited by shares carried on banking business which was restricted to its shareholders. However, a shareholder, who had neither contributed by way of recurring deposit nor had taken any loan from the company, was entitled to participate in the profits as and when the dividend was declared. The Supreme Court laid down that in the absence of complete identity between the contributors and the participators, the benefit of mutuality was not available.
Yum Restaurants (Marketing)(P.)Ltd.v/s. Commissioner of Income-tax [2009] 180 TAXMAN 27 (DELHI) Assessee-company was a wholly owned subsidiary company of YRIPL which was engaged in developing and managing franchisees for running restaurants. It was set up to carry out and economise cost of advertising and promotion by catering to specific needs of franchisees of YRIPL in order to enable them to concentrate on restaurant operations and management. Assessee-company filed its return declaring nil income on ground that it was a non- profit organization governed by principles of mutuality. The Hon'ble High Court upheld decision of Tribunal and Commissioner (Appeals) noting fact that assessee-company had not only received contributions from various franchisees but also from "P1 Ltd. and YRIPL who were neither franchisees nor beneficiaries, and, therefore, essential requirements of a mutual concern were missing.
In the case of Commissioner of Income-tax v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551 (SC): held In the earliest case of Royal Western India Turf Club, the Supreme Court adopted a very strict approach in 10 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
applying the principle of mutuality. In that case, the assessee, which was an incorporated company, carried on the business of race course and dealt with non-members as well in the ordinary course of business carried on with a view to earning profit as in any other concern. It gave to its members the same or similar amenities as it gave to non-members. Oh these facts, the Supreme Court held that *the facilities were given to members and non-members alike for a price and therefore "Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and then activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality."
The courts held that the concept of mutuality is based on the fact that there is existence of an association of persons joined together to achieve a common objective by mutually contributing to the same with absolute and clear mind not to earn any profits or gains. Thus the essential elements of a mutual organization are i. It is an association of people called members ii. There is a common cause iii. Every member makes his contribution; and iv. The aim of the activity is not to earn profits or gains.
Recently, the Apex Court has settled the issues regarding the principle of mutuality in two land-mark judgments, viz. (i) CIT Vs. Bankipur Club Ltd., 226 11 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
ITR p.97 (SC), and (ii) Chelmsford Club Vs CIT,243 ITR p.89 (SC). The Supreme Court in the case of CIT Vs. Bankipur Club Ltd., 226 ITR p.97 had an occasion to deal with the claims of a number of clubs seeking benefit based on the principle of mutuality. The principle laid down by the Apex Court in the case of Bankipur Club Ltd., may be summarised, as follows:-
"Under the Income-Tax Act, what is taxed is, the 'income, profits or gains' earned or 'arising', 'accruing' to a 'person'. Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associating together in this way does not give rise to profits, which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers, does not affect the mutuality of the enterprise." [Head Note p.97 of the Report] items of receipts from the members also, were to be taken into account in computing the total income of the company.
The principle of mutuality in respect of the income of "mutual concern" has been further clarified by the Apex Court in the case of Chelmsford Club Vs. CIT, 243 ITR p.89 (SC). The principles laid down have been summarised in the head note on pp.89 & 90, which is reproduced, as follows:12
ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
"Under the Income-Tax Act, what is taxed is, the 'income, profits or gains' earned or 'arising', 'accruing' to a 'person'. Where a number of persons combine together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associating together in this way does not give rise to profits, which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities, which it offers, does not affect the mutuality of the enterprise. The law recognises the principle of mutuality excluding the levy of income- tax from the income of such business to which the above principle is applicable. A perusal of S. 2(24) of the Income-tax Act, 1961, shows that the Act recognises the principle of mutuality and has excluded all businesses involving such principle from the purview of the Act, except those mentioned in clause (vii) of that section. The three conditions, the existence of which establishes the doctrine of mutuality are (i) the identity of the contributors to the fund and the recipients from the fund, (II) the treatment of the company, though incorporated as a mere entity for the convenience of the members, in other words, as an instrument obedient to their mandate, and (Hi) the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves."13
ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
The basic principle of mutuality applies to all non- commercial activities. As regards income from commercial pursuits, if a club or society or any other entity sets about on an adventure of a commercial nature, it would lose its identity as a mutual concern and it cannot lay any claim for exemption. The Apex Court in the case of CIT Vs. Bankipur Club Ltd., 226 ITR p.97 (SO has laid down certain guide lines in this respect, which have been summarized and reproduced, as follows:
"The decisions of the Supreme Court in GIT Vs. Royal Western India Turf Club Ltd., 24 ITR p.551; GIT Vs. Kumbakonam Mutual Benefit Fund Ltd., 53 ITR p. 241 and Fletcher(on his own behalf and on behalf of Trustees and Committee of Doctor's Cave Bathing Club) Vs. ITC, 3 All ER 1185 (PC), lay down the broad proposition that, if the object of the assessee-
company claiming to be a "mutual concern" or "club", is to carry on a particular business and money is realised both from the members and from non- members, for the same consideration by giving the same and similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole, disclose the same profit-earning motive and are alike tainted with commercially. In other words, the activity carried on by the assessee in such cases, claiming to be a "mutual concern" or "members' club" is a trade or an adventure in the nature of trade and the transactions entered into with the members or non-members alike is a trade / business / transaction and the resultant surplus is profit-income liable to tax."
On the basis of the aforesaid judgments, it may be stated that the activity carried on by the assessee in the aforesaid types of cases, claiming to be a "mutual concern" or "members' club", is a trade or an adventure in the nature of trade and the transactions 14 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
entered into with the members or non-members alike is a trade or a business transaction and the resultant surplus is profit-income liable to tax.
In the case of C1T Vs. Salem District Urban Bank Ltd., 8 ITR p.269 (Mad.)itwas held in this case that a co-operative society, which carries on ordinary banking business with non-members also, is not a mutual benefit society. Rajpath Club Ltd. Vs. CIT, 211 ITR p.379 (Guj.). ln this case, the interest received by the assessee, a sports club, from Fixed Deposit in bank has been held taxable, as the interest was not from a mutual activity.
Automobile Association of Bengal Vs. CIT, 69 ITR p.878 (Cal.) it was held in this case that where the assessee an automobile association ,which running on non profit basis published a monthly magazine for the benefit of its members and collected advertisements for this purpose both from non- members and some of the members, the profits so made went to increase the funds of the assessee and benefits out of the same came to the members qua members but not qua contributors or advertisers and thus, there was absence of mutuality and this made the profit, the income of the assessee-association and taxable as such.
In the case of CIT Vs. Madras Race Club, 105 ITR p.433 (Mad.) it was established that ,where the assessee-club had as its primary business the running of race clubs and the members who paid subscriptions were admitted free on race days and the club also provided allied facilities to its members like golf, billiards, tennis, etc. This was not also a case of mere members', club, which came into existence for the purpose of providing certain amenities to the members without any business 15 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
element as such. Therefore, the claim for exemption could not be said to have been established either on the principle of mutuality or on the principle of the absence of trade or profit motive.
In view Of above decisions of various Courts and facts of the case, it is clear that the appellant trust is not severed by principle of mutuality hence it is held that its receipts are taxable. The grounds of appeal taken up by the appellant on this account are dismissed."
7. The assessee states in the course of hearing that both the lower authorities have wrongly denied mutuality exemption by holding that section 12A registration is not available in its case. It submits that this registration is only relevant in case an assessee claims itself to be a charitable institution performing alike activities as prescribed u/s. 2(15) of the Act and not for entertaining mutuality plea. The assessee's claim is that it fulfils all essential conditions of the mutuality concept. It is contended that this mutuality claim is confined only qua contributions made by its members towards property shows and other activities carried out. And those derived from non members already stand declared as income in the corresponding assessment years. A catena of case law is also quoted in support of this mutuality argument. The same shall be discussed hereunder. The assessee accordingly prays for acceptance of its appeal.
16ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
8. The Revenue strongly supports the lower authorities reasoning as narrated in the preceding paragraphs and prays for confirmations thereof.
9. We have heard both the parties and perused the case files. There is no dispute that the assessee-company is registered u/s.25 of the Indian Companies Act,1956. Its memorandum of objects already stands reproduced. It has carried out some fiestas, property shows and cricket tournaments resulting in contributions in question received from members and non members. It seeks to apply mutuality concept in case of members contributions. Hon'ble apex court in case of Bangalore Club v/s. CIT (2013) 350 ITR 509 (SC) considers all the relevant case law right from Styles (Surveyor of Taxes) v/s. New York Life Insurance Co.(1889)2 TC 460 (HL) till the relevant point of time in reiterating three basic features for application of this mutuality concept. The first one is that there has to be a complete identity between the class of contributors and participators and the particular lable or form by which a mutual association is known is of no consequence. Second feature is that action of the participators and contributors must be in furtherance of the mandate of the mutual association. Third feature is that there should not be any scope of profiteering by the contributors from a fund made by them which could only be expended or returned to themselves. Their lordships are of the view that mutuality 17 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
concept is in furtherance to the notion that neither any one can trade nor can he derive profits from oneself. We proceed to deal with facts of the case keeping in mind the abovestated three features. Coming to the first one of a complete identity of contributors and participators leading to raising of the fund in question, there is no dispute that assessee's contributions collected comprise of funds raised from members as well as non members. It seeks to raise a distinction qua the one collected from members to that derived from non members. We disagree with this argument. The fact remains that it is the overall nature of the contribution that matters for applying mutuality concept which acts as an exception to the general principles of the assessee's income. Therefore, we observe that the assessee's contribution do not satisfy the abovestated preposition of complete identity between contributors and participators since the non members identity is nowhere in picture after they have made the impugned contribution.
10. We come to the second feature of the mutuality concept as to whether action of the participators and contributors is in furtherance to mandate of the association or not. Their lordships observe that the same can be determined from the memorandum of articles of associations, rules of membership and rules of the organisation etc. The assessee's objects stand reproduced hereinabove. Clause "J" thereof stipulates that the assessee may collect and accept 18 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
contributions from members as and when required as determined by the association and to make and create therefrom a fund for office maintenance, salary to employees, provide essential services to members and raise a sinking fund for emergency and or other contingencies. There is no mechanism provided in the abovestated objects for raising receipts from non members. And also in carrying out any activities of fiestas, property shows and cricket tournaments. The assessee's explanation does not prove any live nexus between objects and impugned activities. These activities carried out are more in the nature of commercial exercises performed in view of contributions received from members and non members than services being performed in furtherance to the mandate of the association. We accordingly hold that the assessee's activities involving action of the participators and contributors do not satisfy its objects/mandate of the association. Thus, the assess fails qua this second feature. We quote case law of CIT v/s. Royal Western Turf Ltd.,(1953) 24 ITR 551 (SC) holding money realised from both members and non-members in lieu of the very services rendered in course of the same business thereby denying mutuality exemption. Their lordships quote absence of any mutual dealing between the members interse and no putting up of a common trend for discharging common obligations undertaken by the contributors for their mutual benefits. The said assessee; an incorporated company was authorized to carry on an ordinary business of a 19 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
racecourse company and that of victuallers and refreshment purveyors and in fact carrying on such a business. It was held that this company's dealings with non members took place in the ordinary course of business carried on with a view to earning profits as any other commercial concern. The mutuality exemption was accordingly denied to the said assessee. We reiterate the facts of the instant case wherein the assessee has dealt with members and non members in raising the impugned contributions qua its activities of organizing fiestas, property fair and cricket tournaments.
11. Coming to the third feature, we notice from the abovestated case law that their lordships hold that there is no scope of profiteering by the contributor from a fund made by them which could only be expended or returned to themselves. We deem it appropriate to observe that once the assessee does not fulfil the above two features, this third one stands rendered academic.
12. Now we come to assessee's case law. The first one is that of (1997) 226 ITR 97 (SC) CIT v/s. Bankipur Club. This club received amounts towards charges for privileges and amenities provided to members as per its rules. There was no commercial element embedded therein. Their lordships held that surplus received arising from the abovesaid facilities were exempt on mutuality concept. The same has been held as not 20 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
applicable in the facts of the instant case as indicated in the preceding paragraphs. The next case law is that of Chelmsford Club v/s.CIT (2000) 243 ITR 89. This assessee-club owned a club house providing recreational and refreshment facilities exclusively to its members on no profit no loss basis as against facts of the instant case. The same is accordingly distinguished. The third judgement quoted before us is that of (2015) 59 taxmann.com 104 (Guj.) CIT vs. Prabhukunj Cooperative Housing Society Ltd., This society received contribution from outgoing members as premium on sale of plots. The hon'ble jurisdictional high court observed that since this amount was to be utilized for benefits of the members of the society and not taxable income. We are of the view that there is no similarity of facts of issue involved between this case law and the one in hand. We hold the same as not applicable in peculiar facts in instant case. We proceed further and find that next judicial precedent quoted is (2015) 56 taxmann.com 281 (Guj.) Junagadh Gymkhana vs.ITO. This club's members had paid guest charges and utilized it for benefit and development of themselves. The hon'ble jurisdictional high court held this case to be covered by mutuality concept on the ground that the same created an identity between the participants and contributors. Just because some transactions are non mutual would not destroy the mutuality factor. We find that the non members therein were only brought to the club and they had not paid any 21 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
amount as against facts of the instant case. We distinguish this case law accordingly. The assessee quotes next judgment of ITAT Kolkata bench (2012) 139 ITD 675 (Kol) Belvedere Estates Tenants Association v/s. ITO wherein the assessee was formed by tenants of a building. It was working for common interest of the members and rendered services as against the assessee before us whose activities in question are not as per its objects being commercial in nature. This case law also does not rescue the assessee's case.
13. The assessee has filed before us another compilation of judgments. i.e. (1987) 168 240 (Ker) Cochin Oil Merchants Association, (1984) 150 ITR 394 (AP) CIT v/s. West Godavari District Rice Mill Association, (1994) 209 ITR 28 (Kol) CIT v/s. Indian Paper Mills Association. All these judicial precedents deal with issue of surplus arising from receipts from members by way of subscription or otherwise which has been held to be covered by mutuality concept. We repeat that the assessee before us has already held as not satisfying that abovestated three features as reiterated in Banglore Club case (supra). The same are held as not applicable in facts of present case. The assessee has drawn our attention to two more judgments i.e. (1994) 209 ITR 294 (Bom) CIT v/s. Aspee Distributors Association and (1968) 69 ITR 878 (Kol.) Automobile Association of Bengal v/s. CIT wherein the concerned assessee had charged membership and a monthly magazine resulting in 22 ITA Nos.1051 to 1056/Ahd/2015 Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
members' contributions. The same have been held to be covered by mutuality concept. We again revert back to the facts of the present case wherein the assessee has carried out property fairs, fieastas and cricket tournaments without proving nexus thereof with the above extracts objects and also received contributions from members and non members. We accordingly conclude that the assessee's arguments claiming its receipts from members as covered by mutuality concept have to be rejected. We order accordingly. The assessee's corresponding grounds raised in all six appeals are declined. The CIT (A)'s orders under challenge are confirmed.
14. All these six appeals ITA Nos.1051 to 1056/Ahd/2015 are dismissed.
Order pronounced in the Court on Tuesday, the 29th Sep. 2015 at Ahmedabad.
Sd/- Sd/-
(PRAMOD KUMAR) (S.S.GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad.
Date:- 29/09/2015
23
ITA Nos.1051 to 1056/Ahd/2015
Asstt.Years: 2006-07 to 2011-12 - respectively. The Gujarat Institute of Housing & Estate Developers.
आदेश क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. बं धत आयकर आयु त / Concerned CIT 4 आयकर आयु त(अपील) / The CIT(A), Ahmedabad
5. वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad.
24